What in the world does gold have to do with buying or selling a home?! Quite a bit, actually.

The reason we used the example of gold was to bring some perspective to the debate as to whether or not homeownership is a wise investment in today’s troubled market. A family shouldn’t focus on the purchase of a home simply as a financial investment. To most people, a home is so much more. But, even if we do look at it as only an investment, we need to look at it in the long term. Take a look at gold for example:

Gold had dropped from over $400 an ounce to $250 an ounce (a 40% decline) from February 1996 to August 1999. People were so glad they hadn’t bought at $400 an ounce!

Lord William Rees-Mogg, the current Chairman of The Zurich Club, in 1997 said:

“No investment has been so thoroughly exploded as gold; most people think that there will no more be another gold boom than there will be another boom in tulip futures in The Netherlands.”

Know what happened next? Gold rose from $250 an ounce to over $1,500 an ounce in the next twelve years. (Gulp.)

Real estate in the long term, has been a great vehicle for building family wealth. The Federal Reserve’s Survey of Consumer Finances, provides a snapshot of family income and net worth. The survey has shown every time that homeowners’ net worth far exceeds that of renters.

  • 1998 – Homeowner net worth exceed renters by 31%
  • 2001 – Homeowner net worth exceed renters by 36%
  • 2004 – Homeowner net worth exceed renters by 41%
  • 2007 – Homeowner net worth exceed renters by 46%

The National Association of Realtors’ has estimated that the 2010 number (yet to be released) to be approximately 41% in 2010, even despite the crazy market climb and descent.

Harvard University just completed a study that showed:

“Even if homeowner wealth fell back to 1995 levels, it would still be 27.5 times the median for renters.”

We certainly are not predicting that real estate will see the same levels of appreciation that gold did. But we do believe that the real estate market will rebound strongly given some time.

Need some help defining your real estate strategy? Give us a call for a free, no obligation consultation.

Committed to helping you Buy. Sell. Live. SMART,

Seth and Alyce